|
{{5-31-96 p.C-3857}}
[¶11,098] In The Matter of First Bank, Lexington, Tennessee, Docket No. FDIC-94-193b (12-2-94).
Bank to cease and desist from such unsafe or unsound practices as operating in violation of applicable consumer laws and regulations; operating with management whose policies are detrimental to the Bank; and failing to provide adequate supervision over the Bank's affairs. (This order was terminated by order of the FDIC dated 3-5-96. See ¶16,079.)
[.1] Truth in Lending Act—File Search—Reimbursement to Borrowers Required
[.2] Consumer Lending—Compliance Officer Required
[.3] Consumer Lending—Compliance Program
[.4] Loans—Consumer Loans—Internal Review System Required
[.5] Bank Secrecy Act—Compliance Program Required
[.6] Violations of Law—Eliminate/Correct
In The Matter of
FIRST BANK
LEXINGTON, TENNESSEE
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-94-193b
{{5-31-96 p.C-3858}}
First Bank, Lexington, Tennessee ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. § 1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated November 10, 1994, whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.
The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT, and issued the following ORDER:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED that the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of affairs of the Bank, cease and desist from the following unsafe or unsound banking practices:
(a) Operating in violation of the following laws and regulations:
1. The Truth-in-Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 226, promulgated thereunder;
2. The Fair Credit Reporting Act, 15 U.S.C. §§ 1681–1681t;
3. The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601–2617, and Regulation X of the Secretary of the Department of Housing and Urban Development, 24 C.F.R. Part 3500, promulgated thereunder;
4. The Equal Credit Opportunity Act, 15 U.S.C. §§ 1691–1691f, the Regulation B of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 202, promulgated thereunder;
5. Section 103.22 of the Secretary of the Treasury's Regulations on Financial Recordkeeping and Reporting of Regulations on Financial Recordkeeping and Reporting of Currency and Foreign Transactions, 31 C.F.R. § 103.22;
6. The Community Reinvestment Act of 1977, 12 U.S.C. §§ 2901–2905, and Part 345 of the FDIC Rules and Regulations, 12 C.F.R. Part 345, promulgated thereunder;
7. Sections 326.8(b), 328.3, 329.1(b)(5) and 338.7(a)(1)(i) of the FDIC Rules and Regulations, 12 C.F.R. §§ 326.8(b), 328.3, 329.1(g)(5) and 338.7(a)(1)(i);
8. Section 106(c)(5) of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1701x;
9. Section 229.12(b) of Regulation CC of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 229.12(b);
10. Section 230.6(a) of Regulation DD of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 230.6(c); and
11. Section 205.9(b) of Regulation E of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 205.9(b).
(b) Operating with management whose policies and practices are detrimental to the Bank; and
(c) Operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank.
IT IS FURTHER ORDERED that the Bank take affirmative action as follows:
[.1] 1. (a) Within 60 days of the effective date of this ORDER, the Bank shall conduct and complete a file search identifying all outstanding consumer loans originated since the April 3, 1992 FDIC Compliance Examination of the Bank and all terminated consumer loans originated since April 8, 1992, in which the annual percentage rate was understated due to the Bank's inclusion of credit life premiums in the amount financed without obtaining from each customer a signed or written affirmative request for the insurance coverage in accordance with the provisions of Section 226.4(d) of Regulation Z of the Board of Governors of the Federal Reserve System, 12 C.F.R. § 226.4(d). The Bank shall spread across the minutes of the board of directors the loans identified by the file search and the method(s) em-
{{5-31-96 p.C-3859}}ployed by the Bank in conducting the search; and
(b) Within 60 days of the effective date of this ORDER, the Bank shall complete full reimbursement to all affected borrowers identified by the above file search in accordance with section 108(e) of the Truth in Lending Act, 15 U.S.C. § 1607(e), and the FDIC Statement of Policy, "Administrative Enforcement of the Truth in Lending Act - Restitution".
[.2] 2. (a) Within 30 days of the effective date of this ORDER, the board of directors of the Bank ("Board") shall appoint and retain a qualified compliance officer to oversee and coordinate the Bank's overall compliance efforts, including the training and supervision of all affected personnel in compliance related matters.
(b) The compliance officer shall be assessed on his/her ability to:
(i) Comply with the requirements of this ORDER;
(ii) Improve and thereafter maintain the Bank's compliance program in a safe and sound manner; and
(iii) Comply with applicable State and Federal Laws and Regulations.
[.3] 3. Within 60 days of the effective date of this ORDER, the Bank shall adopt and implement a written compliance program which at a minimum shall address the proper maintenance of records, the establishment of appropriate internal controls and procedures and sufficient education and training for all compliance personnel to provide effective guidance, control and personnel over the Bank's consumer lending function. The compliance program shall be in a form and manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations.
[.4] 4. (a) Within 60 days of the effective date of this ORDER, the Bank shall establish a consumer loan review system ("System") to review the Bank's consumer loan documentation, including but not limited to disclosure statements and adverse action notices, and to identify, categorize and correct errors contained in such documents prior to dissemination to the consumer.
(b) The System shall provide that the reviewer of each document shall be an individual, other than the preparer of such documents, knowledgeable in State and Federal consumer laws and regulations.
(c) The System shall provide for a monthly written Report to be furnished to the Bank's board of directors which shall identify the number of transactions reviewed and then number of transactions found to be in noncompliance with all State and Federal consumer laws and regulations. A written summary of each monthly Report shall be attached to the progress reports required by paragraph 7 below.
[.5] 5. Within 30 days of the effective date of this ORDER, the Bank shall adopt and implement a Bank Secrecy Act program in compliance with Part 326 of the FDIC Rules and Regulations, 12 C.F.R. Part 326, which is reasonably designed to assure and monitor compliance with the Secretary of the Treasury's Regulations on Financial Recordkeeping and Reporting of Currency and Foreign Transactions, 31 C.F.R. Part 103.
[.6] 6. (a) Within 60 days from the effective date of this ORDER, the Bank shall prepare a written plan ("Plan") to (i) eliminate and/or correct all violations of law and/or regulations which are set out on pages 2 through 2-a-14 of the FDIC Compliance Report of the Bank as of April 8, 1994, and (ii) to henceforth comply with all applicable laws and regulations.
(b) The Plan shall specify the actions to be taken by the board of directors and the time frames for each action.
(c) Within 60 days from the effective date of this ORDER, a copy of the Plan shall be submitted to the Regional Director for review and comment.
(d) Within 30 days from receipt of any comment(s) and after incorporation of such comment(s) in the Plan, the board of directors shall approve the Plan which, approval, shall be recorded in the minutes of the meeting of the board of directors.
(e) It shall remain the responsibility of the board of directors to fully implement the Plan. In the event the Plan, or any portion thereof, is not implemented, the board shall immediately advise the Regional Director in writing.
7. On the fifteenth day of the second month following the effective date of this ORDER, and on the fifteenth day of every third month thereafter, the Bank shall furnish a written progress report to the Regional Director de-
{{5-31-96 p.C-3860}}tailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has released the Bank in writing from making further reports.
The effective date of this ORDER shall be ten (10) days from the date of its issuance.
The provisions of this ORDER shall be binding upon the Bank, its directors, officers, employees, agents, successors, assigns, and other persons participating in the conduct of the Bank.
The Provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of the ORDER shall be modified, terminated, suspended, or set aside by the FDIC.
Dated: December 2, 1994.
Pursuant to delegated authority.
|
